Trade-related disruptions at US-Mexico border

Mexico's National Migration Institute (Instituto Nacional de Migración: INM) said on 31 March that it planned to resume the granting of humanitarian visas to Central American migrants entering the country from 1 April. The announcement was made two days after US President Donald Trump threatened to close sections of the US-Mexico border if Mexico failed to contain migrants from entering the US through its territory.

The US Department of Homeland Security (DHS) apprehended more than 75,000 individuals, the highest number in 12 years, attempting to enter the US illegally through its southern border in February, with media reports stating that this number could have increased to around 100,000 in March. Despite Mexico resuming the granting of humanitarian visas, coupled with providing work visas in the hope of persuading migrants to stay in Mexico, the government does not have the capacity to stop migrants from passing through its territory.

The Mexico-Guatemala border is highly porous, which enables the passage of migrants. Furthermore, Mexican security forces deployments at border posts are limited in size and unlikely to use force to stop Central American migrants.

Significance

Mexico's inability to contain migration flows will increase the probability of large migration flows continuing over the next year, increasing the risk of trade-related disruptions at the US-Mexico border. Waiting times at ports of entry are already likely to slow down as the DHS is shifting personnel from ports of entry at the US southern border to help the processing of asylum seekers.

A partial or total shutdown of the border, as threatened by President Trump, would be highly disruptive to manufacturing, automotive, textiles, and, among other industries, agribusiness across both sides of the border. Goods worth USD422.1 billion crossed the US-Mexico border by truck in 2018, an average of USD35.1 billion per month. Inaction by the Mexican government over the upcoming days in regards to the containment of migrant caravans currently in Mexico, as well as criticism by Mexican authorities directed at President Trump, would indicate an increased risk of the US government temporarily shutting down border crossings.

Posted 03 April 2019 by Carlos Cardenas, Director, Latin America Country Risk and Forecasting, S&P Global Market Intelligence